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One of last year's highest-performing hedge funds, the 788 China Fund, has recorded a loss of 57% for the first three months of this year after what its manager described as "the most horrible quarter I have experienced in 24 years of managing money".

But the fund, which is managed by Swiss asset manager Heritage Fund Management, for Cayman-registered manager 788 Asset Management, has recovered 40% of its value since the start of April, according to Jacques Mechelany, who runs it: "The month of March was terrible, there was a silly sell off. We made the mistake of entering the market without imagining it would sell to such an irrational level. But we stuck to our positions and have ridden out the volatility."

The Shanghai Shenzen 300 index fell 28.99% in the first three months of the year, while the Hang Seng lost 38.53%. The HSBC China Momentum lost 32.5% of its value over the period, the worst performer of 103 mutual funds invested in the region, according to data provider Morningstar. The best performer was the HSBC Greater China BonBon Capital Guaranteed fund, which made 2.31%.

The 788 China Fund was one of the best performing hedge funds last year, generating a net return of 114.82%. The best performers last year included the credit opportunities fund run by US firm Paulson, which made 590% net of fees, according to investors; US firm Passport Capital's long/short equity fund, which made 219.44% according to Barron's; US firm Balestra Capital, which made 199.14%, according to Barron's; and US firm Harbinger Capital Partners' flagship fund, which made 116.10%, according to Barron's.

Mechelany said he was optimistic: "Chinese domestic A-shares have now corrected, 47% off their peak, and value is being restored. Although we do see further marginal slowing down ahead, all our indicators are pointing to a continuation of very high growth."